Self-directed retirement accounts, like Checkbook IRAs and Solo 401(k)s, are becoming a go-to for savvy investors—especially those diving into alternative investments like private offerings or digital assets. The idea of growing your retirement savings tax-free is incredibly appealing, but with the IRS rolling out new rules in 2025, it’s crucial to stay on top of the changes.

If you’re managing one of these accounts, or thinking about opening one, here’s what you need to know.

1. Contribution Limits Got a Nice Bump

For Solo 401(k) Plans:

The elective deferral limit has increased to 23,500 (up from 23,000 in 2024). That’s an extra 500 dollars you can tuck away tax-deferred.

If you’re 50 or older, the standard catch-up contribution stays at 7,500. But here’s the kicker: if you’re between 60 and 63, you can now contribute an additional 11,250. That means you could potentially stash away up to 34,750 dollars for the year.

Since a Solo 401(k) is for self-employed individuals, you act as both employee and employer. As the employer, you can contribute up to 25% of net earnings from self-employment, with a combined total contribution limit (elective deferral + employer contribution) of $70,000.

For IRAs:

The standard contribution limit for IRAs remains at 7,000 dollars.

If you’re 50 or older, you can still add an extra 1,000 dollars as a catch-up contribution, bringing your total to 8,000 dollars.

2. Roth IRA Income Limits Adjusted for Inflation

If you’re contributing to a Roth IRA, pay attention to the new income thresholds. The IRS has adjusted the phase-out ranges to reflect inflation, which could impact how much you’re allowed to contribute.

Single Filers: The phase-out range is now 150,000 to 165,000.

Married Filing Jointly: The range is 236,000 to 246,000.

Taxpayers with modified adjusted gross incomes (MAGI) within these ranges may contribute a reduced amount, while those above the range are ineligible for Roth IRA contributions.

3. Bigger Catch-Up Contributions for Ages 60 to 63

As I mentioned above, this is a game-changer for those nearing retirement. If you’re between 60 and 63, you can now contribute an extra 11,250 to your Solo 401(k) or Traditional 401(k) plan. That’s significantly higher than the standard 7,500 catch-up limit for those 50 and older. It’s a great opportunity to supercharge your savings in those final years before retirement.

4. Stricter Compliance and Reporting Rules

While the increased limits are great news, account holders should be aware of the following compliance-related changes:

Prohibited Transactions: The IRS continues to scrutinize transactions that may constitute self-dealing or other prohibited activities within self-directed accounts. It’s important to consult a financial advisor to ensure all investments comply with IRS regulations.

Reporting Requirements: With the implementation of the Corporate Transparency Act, certain entities, including those used within Checkbook IRAs, may have additional reporting obligations to the Financial Crimes Enforcement Network (FinCEN)What Does This Mean for You?

The 2025 IRS updates present both opportunities and responsibilities for self-directed retirement account holders. As always, it’s advisable to consult with a qualified financial advisor or tax professional to navigate these updates effectively.

For more detailed information, refer to the official IRS notices and guidelines on IRS.gov.